Mortgage lending rose to a six year high of £12.2billion in April, up 52 per cent on the same month a year earlier as the housing market continues to boom, the latest figures from the British Banker’s Association (BBA) showed today.

The BBA said mortgage lending continued to be powered by rising demand but also by rising house prices.

As the lending totals rise, the actual number of mortgage approvals has fallen for three months in a row and it hit an eight month low in April showing fewer people are borrowing more as house prices continue to accelerate.

Eight year high: Mortgage lending in April hit its highest level since August 2008, the BBA said

While mortgage approvals for new house purchases were 25 per cent higher in April, compared with a year earlier, at 42,173 - with a
value of £6.9 billion - they fell to an eight month month low and also dropped below
the six-month average of 45,720.

Experts suggested the fall in mortgage approvals also reflected new affordability
rules on mortgage lending, after the Mortgage Market Review (MMR) changes came into force last month.

Meanwhile, lending to business continued to fall, down 1.9 per cent or £13.2billion, compared with April last year.

But the BBA said this represented a £9.4billion decline in lending to estate agents who thanks to the booming property market were deleveraging from their bank borrowing.

Lending to businesses overall compared favourably with the annual fall in business lending of 5.1 per cent recorded in April 2013 compared with a year earlier.

Richard Woolhouse, chief economist at the BBA said: ‘Our figures show that housing market is mixed.The value of mortgages taken out in April was the highest for six years however looking ahead mortgage approvals have fallen three months in a row.

‘The amount of borrowing is however still well below the levels we were seeing before the financial crisis.’

Eight month low: But the number of mortgage approvals hit its lowest level since October 2013 suggesting fewer people were borrowing more as a result of higher house prices

Jonathan
Harris, director of mortgage broker Anderson Harris, said the number of
mortgage approvals for house purchase showed the property market was not
‘running away' with itself.

‘The introduction of the Mortgage Market Review may be having an effect:
while it's still early days, with many lenders introducing the new
rules weeks ahead of the official launch, its impact may already be
starting to be felt,' said Mr Harris.

'Talk
of interest rates rising continues, with Charlie Bean, the retiring
deputy governor of the Bank of England saying at the weekend that they
could rise to 3 per cent in the next three to five years.

‘While
there is no need for borrowers to panic, it is important to consider
whether you can afford any mortgage you take on and to opt for a fixed
rate if you are concerned about budgeting.'

Howard
Archer, chief UK and European economist at IHS Global Insight said
tighter mortgage lending standards appeared to have at least temporarily
taken some of the heat out of the housing market.

But he said house prices still looked more likely than not to see robust increases over the coming months.

He added: ‘Underlying buyer interest still seems to be robust, according to most survey evidence and it is likely to continue to be supported by substantially improved consumer confidence, markedly rising employment, improving earnings growth and extended low mortgage interest rates. It is also currently being fuelled by the Help to Buy initiatives.’

The mortgage lending figures come a week after state-backed Lloyds Banking Group announced it would limit all mortgage lending above £500,000 to 4 times a borrower’s income, with Royal Bank of Scotland expected to announce similar plans later this week.

Still lower: Business lending continued to fall in April but the decline was not as bad a a year earlier and partly reflected less borrowing by property firms as the housing market boom boosted trade

The decision by Lloyds last week sparked claims of political pressure but this was swiftly denied by the Bank of England which claimed Lloyds had made a normal commercial decision.

Despite this the Chancellor is likely to have been pleased that Lloyds appeared to be attempting to take the heat out of the politically contentious London property market.

The lender's voluntary announcement came ahead of an expected crackdown by the Bank of England as concerns the property market is overheating continue.

The Bank of England’s Financial Policy Committee (FPC), which is in charge of the stability of the financial system, meets on June 17 and is expected to discuss using its powers to tame the wilder extremes of the housing market, notably London, where average prices are rising at 18 per cent a year.

The FPC's powers are a key alternative to interest rate rises as a way to control housing bubbles.

The BBA's figures also showed non-mortgage borrowing has increased by 1.4 per cent over the past year.

Within this, people's borrowing on credit cards has grown by 3.5 per cent over the last year, while borrowing on personal loans and overdrafts has edged down by 0.5 per cent.

The report said that £8.1billion in new spending was put on credit cards in April, which is 4.9 per cent more than in the same month a year earlier.